Correlation Between Plaza Retail and DRI Healthcare

Can any of the company-specific risk be diversified away by investing in both Plaza Retail and DRI Healthcare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Plaza Retail and DRI Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Plaza Retail REIT and DRI Healthcare Trust, you can compare the effects of market volatilities on Plaza Retail and DRI Healthcare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Plaza Retail with a short position of DRI Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plaza Retail and DRI Healthcare.

Diversification Opportunities for Plaza Retail and DRI Healthcare

0.55

Correlation Coefficient

Plaza Retail  DRI Healthcare

Very weak diversification

The 3 months correlation between Plaza and DRI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and DRI Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRI Healthcare Trust and Plaza Retail is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Plaza Retail REIT are associated (or correlated) with DRI Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRI Healthcare Trust has no effect on the direction of Plaza Retail i.e., Plaza Retail and DRI Healthcare go up and down completely randomly.

Pair Corralation between Plaza Retail and DRI Healthcare

Assuming the 90 days trading horizon Plaza Retail REIT is expected to under-perform the DRI Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Plaza Retail REIT is 2.44 times less risky than DRI Healthcare. The stock trades about -0.01 of its potential returns per unit of risk. The DRI Healthcare Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  502.00  in DRI Healthcare Trust on December 4, 2024 and sell it today you would earn a total of  321.00  from holding DRI Healthcare Trust or generate 63.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Plaza Retail REIT  vs.  DRI Healthcare Trust

Plaza Retail REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Plaza Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DRI Healthcare Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days DRI Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Plaza Retail and DRI Healthcare

The main advantage of trading using opposite Plaza Retail and DRI Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plaza Retail position performs unexpectedly, DRI Healthcare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in DRI Healthcare will offset losses from the drop in DRI Healthcare's long position.

The idea behind Plaza Retail REIT and DRI Healthcare Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.